Economy. ROC (Taiwan) Yearbook 2011 Ch08 economy

The Taipei International Cycle Show, featuring a vast variety of bicycles and associated products from around the world, attracts increasing numbers of exhibitors and visitors each year. (Courtesy of the Taiwan External Trade Development Council)

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At a Glance

Taiwan’s economic performance in 2010 surpassed expecta-tions, registering nearly 11 percent growth. Foreign trade surged on the strength of steady recovery of the global econ-omy. Industrial production indices saw double-digit increas-

es, and business investment greatly expanded. Unemployment dropped to 4.67 percent in December 2010 from 5.74 percent a year earlier, and consumer confidence grew, while prices rose moderately.

Since taking office in May 2008, the administration of President Ma Ying-jeou has striven to transform Taiwan into a global innovation cen-ter, an Asia-Pacific economic and trade hub, and an operations center for overseas-based businesses. Toward that end it has implemented a series of policy initiatives including tax reform, cultivation of talent and encouragement of innovation. Also included are measures for promot-ing industries with high potential for rapid development. Of further significance, in June 2010, Taiwan signed a trade pact with mainland China, and teams of government and industry experts traveled to major cities around the world to introduce outstanding investment opportuni-ties in Taiwan to foreign business communities.

Strong rebound from global recession•

Strategies for stimulating innovation and transformation•

Programs for development of target industries•

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National CompetitivenessTaiwan continued to play a dynamic

role in the global economy in 2010. Ac-cording to World Trade Organization statistics, it was the world’s 16th-largest exporter and 17th-largest importer of merchandise, while ranking No. 24 and No. 28 in export and import of com-mercial services, respectively. One of the most powerful players in the global infor-mation and communications technology (ICT) industry, it is also a major supplier of other goods across the industrial spec-trum, from chlorella health food supple-ments to powered wheelchairs.

A key factor underpinning such per formance i s the ROC govern-ment’s formulation of policies to foster development and sustain the nation’s economic competitiveness by promot-ing investment in human resources, research and development (R&D) and industrial upgrading as well as through other initiatives aimed at creating ad-vantages for its economy. For such reasons, and because of its enterprises’ strong entrepreneurial spirit, Taiwan’s business and investment environments have consistently been ranked as superi-or by well-regarded economic research organizations. For example:

In the 2011 • World Competitiveness Yearbook issued by Switzerland’s In-ternational Institute for Management Development, Taiwan moved up two places to No. 6 overall to achieve its best ranking in over a decade. It retained the third spot in the “business efficiency” category, attributable in part to its com-panies’ adaptability and its stock market efficiency, ranking first and second, re-spectively, in these categories.Taiwan ranked 13th in the World Eco-• nomic Forum’s (WEF) Global Com-petitiveness Report 2010-2011, earning high marks in the categories of health,

higher education, personnel resources, market efficiency and innovation.Taiwan placed sixth in the WEF’s Net-• worked Readiness Index of the Global Information Technology Report 2010-2011, up five notches from the previ-ous year, for its best showing since the index was first released in 2001. It also ranked second in terms of government ICT usage.In its April 2011 • Business Risk Service report, U.S.-based Business Environ-ment Risk Intelligence again rated Taiwan as having the fourth-lowest-risk environment out of 50 nations surveyed.

GDP ProfileDue to improving global conditions as

well as stronger domestic consumer confi-dence buoyed by rising employment and vi-brant financial activity, Taiwan’s real gross domestic product (GDP) grew by 10.88 percent in 2010 to reach US$430.10 billion. Net exports contributed 2.40 percentage points to GDP growth while real domes-tic demand—expanding 9.91 percent— accounted for 8.48 percentage points.

Among the factors boosting domestic demand, private consumption rose 3.65 percent, helped by a 9.60-percent increase in business revenues in the wholesale, re-tail and food and beverage sectors. Private investment, meanwhile, grew 32.51 per-cent as high-tech firms increased capital expenditures to improve production pro-cesses and expand capacity to meet rising export demand. Despite ongoing high levels of spending on public infrastructure in 2010, government investment in that year declined 1.71 percent compared with the still higher level of such spending in 2009. Nominal GDP per capita, as meas-ured in U.S. dollars, rose to a record-high US$18,588, in part due to the nearly 6-percent appreciation of the New Taiwan dollar against the U.S. dollar.


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The biggest contributor to GDP, at 67.08 percent, was the service sector, which employed 58.84 percent of the work force. Industry (manufacturing, con-struction, utilities, mining and quarrying), comprising 35.92 percent of the work force, contributed 31.34 percent of GDP. Agriculture, with 5.24 percent of workers, made up the remaining 1.58 percent.

Compared with 1986, when the con-tribution to GDP of the manufacturing segment of the industrial sector peaked at 37.48 percent, its contribution in 2010 was 26.27 percent, up 2.44 percentage

points from the previous year. In 2010, its industrial production index grew 28.60 percent year-on-year, with large increases in production of machinery and electronic components.

Small and medium-sized enterprises (SMEs) have continued to play a critical role in the economy. According to the Ministry of Economic Affairs (MOEA), SMEs in Taiwan numbered about 1.25 million at the end of 2010, accounting for 97.68 percent of all enterprises. They employed 8.19 million workers, or 78.06 percent of the total work force. SMEs’

Macroeconomic Indicators

2010 GDP (nominal) US$430.10 billion2010 GDP per capita (nominal) US$18,5882010 GDP per capita (ppp – IMF) US$35,2272010 GDP growth* 10.88%2000-2009 GDP growth, average* 4.04%2011 GDP growth, projected* 4.81%

2010 Unemployment rate, average 5.21%2010 Unemployment rate, end of year 4.67%

2010 Consumer price index (CPI), average change 0.96%2011 CPI, projected average change 2.18%2010 Wholesale price index (WPI), average change 5.46%2011 WPI, projected average change 2.23%

2010 Exports US$274.60 billion (up 34.8%)2010 Imports US$251.24 billion (up 44.1%)2010 Balance of trade US$23.36 billion surplus2010 Foreign exchange reserves, end of year US$382.01 billion

2010 Registered inward investment US$3.91 billion2010 Registered outward investment US$15.05 billion2010 Registered mainland China-bound investment US$12.23 billion

2010 4th-largest holder of foreign exchange reserves 2010 16th-largest exporter of merchandise2010 17th-largest importer of merchandise2010 24th-largest exporter of commercial services2010 28th-largest importer of commercial services

*Based on 2006 constant pricesSources: Directorate-General of Budget, Accounting and Statistics, Executive Yuan; Ministry of Economic Af-

fairs; Central Bank of the Republic of China; International Monetary Fund; World Trade Organization


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sales of goods and services comprised 29.55 percent of all sales and made up 16.88 percent of total export value in 2010.

SMEs’ actual contribution to total export sales and the economy as a whole, however, is much greater than these figures suggest, considering their impor-tant role in the upstream value chains supporting larger-scale enterprises’ production and exports. To enhance their performance, the ROC government has

encouraged the development of new tech-nologies and products by SMEs under the Small Business Innovation Research Pro-gram 小型企業創新研發計畫, which offers subsidies covering up to 50 percent of their R&D costs. The Small and Medium Enterprise Credit Guarantee Fund of Taiwan 中小企業信用保證基金, which pro-vides guarantees for bank loans to busi-nesses, was also expanded to NT$842.8 billion (US$26.64 billion) in 2010.

Composition of GDP by Sector in 2010

Share of Annual Change Annual ChangeSector of Economy GDP1 in GDP in Output (%) Share (%) Value2 (%)

Agriculture (5.24% of work force) 1.58 -0.16 -0.58

Industry (35.92% of work force) 31.34 2.38 18.52Manufacturing 26.27 2.44 20.71Construction 2.77 0.09 13.41Electricity and natural gas 1.20 -0.17 -3.58Water supply and remediation services 0.63 -0.03 3.85Mining and quarrying 0.46 0.04 21.88

Services3 (58.84% of work force) 67.08 -2.22 6.00Wholesale and retail trade 18.19 -0.48 6.66Real estate 8.59 -0.58 2.55Public administration and defense 7.26 -0.39 3.89Finance and insurance 6.37 -0.04 8.91Education 4.62 -0.37 1.42Information and communications 3.47 -0.23 2.97Health and social services 3.03 -0.15 4.23Transportation and storage 3.04 -0.01 9.32

Professional, scientific and technical services 2.24 -0.05 7.16

Accommodation and food services 1.97 -0.08 5.26Support services 1.46 -0.01 8.70Arts, entertainment and recreation 0.90 -0.05 4.53Other services 2.98 -0.14 4.67Service-related value-added tax 1.83 0.17 20.73Service-related import duties 1.12 0.18 29.79

12010 GDP: US$430.10 billion 2Based on New Taiwan dollar data3Includes import duties and value-added taxNote: Figures do not add up to 100 percent due to rounding off. Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan


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Central Government Revenues and Expenditures

According to the Executive Yuan’s Directorate-General of Budget, Account-ing and Statistics 行政院主計處, in the 2010 fiscal year, central government revenues fell 3.2 percent from the previous year to NT$1.50 trillion (US$47.41 billion), while government expenditures de-creased by 3.5 percent to NT$1.66 trillion (US$52.47 billion). (See pie chart “Final Accounts of FY 2010 Central Govern-ment Revenues and Expenditures.”)

Financial ServicesBanking

With increased economic activity and private-sector investment, bank credit expanded in 2010, raising the annual av-erage growth rate of the broadly defined money supply (M2) by 4.59 percent to NT$31.04 trillion (US$980.85 billion) by the end of the year. The Central Bank of the Republic of China 中央銀行 tightened its monetary policy, raising the discount rate three times during the year to 1.625 percent by year-end, after having cut


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interest rates seven times from late 2008 to early 2009. The discount rate was fur-ther raised to 1.875 percent in July 2011.

At the end of 2010, there were a total of 402 banking institutions in operation (see table “Structure and NPL Ratios of Bank-ing Sector in 2010”). As of that time, year-on-year, Taiwan’s 37 domestic banks saw their total assets increase by 6.62 percent to NT$32.76 trillion (US$1.04 trillion) and their net worth by 7.90 percent to NT$2.09 trillion (US$66.03 billion). Over 2010, their deposits expanded 6.64 percent to NT$23.20 trillion (US$733.31 billion), while their loans increased 7.33 percent to NT$18.33 trillion (US$579.28 billion).

Domestic banks also showed steady improvement in asset quality. At the end of 2010, all had non-performing loan (NPL) ratios of less than 2 percent, with a record-low average of 0.61 percent; their coverage ratios of allowances for NPLs, meanwhile, climbed to a record-high 158.07 percent; and their average capital adequacy ratio was 11.97 percent, well above the regulatory requirement of 8 percent. All domestic banks passed stress tests conducted by the Executive Yuan’s Financial Supervisory Commission 行政

院金融監督管理委員會 in August 2010 to

determine if they would have enough liquidity to withstand the potential im-pact of the year-end expiration of the full deposit guarantee policy implemented in late 2008 amid the global financial crisis.

In recent years, domestic banks have established footholds overseas, in part, to better serve Taiwanese firms operat-ing abroad, particularly in Vietnam and mainland China. Of the 266 branches and liaison offices established worldwide by 2010, 57 were in Vietnam and 13 in mainland China.

InsuranceAccording to a “sigma” study released

by global reinsurer Swiss Re, Taiwan had the world’s highest insurance penetration rate of 17.29 percent in 2010, while its insurance density—or insured amount per capita—reached US$2,758, the 18th-highest worldwide and the third-highest in Asia. According to the study, the com-bined premium income of Taiwan’s insur-ance industry was the 13th-largest in the world, accounting for 1.55 percent of the global market in 2010.

As of December 2010, there were 57 insurance companies operating in

Structure and NPL Ratios of Banking Sector in 2010

Type of Institution No. of No. of Share of Share of NPL Institutions Branches Deposits1 (%) Loans2 (%) Ratio (%)

Domestic banks 37 3,334 76.95 92.29 0.61Foreign banks 28 92 1.31 2.40 0.22Credit cooperatives 26 261 1.84 1.69 0.57Credit departments of farmers’

and fishermen’s associations 301 852 4.98 3.62 3.15Bills finance companies 9 30 ---- ---- ----Postal savings system 1 1,321 14.92 ---- ----

1Total deposits (December 2010): NT$30.15 trillion (US$952.89 billion)2Total loans (December 2010): NT$19.86 trillion (US$627.72 billion)Source: Financial Supervisory Commission, Executive Yuan


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Vibrant economic activity in 2010, supported by increased private consumption and record growth in trade, boosted investor confidence and spurred a 9.6-percent rise in the benchmark TAIEX stock index as of year’s end.

Taiwan, including three reinsurers, 31 life insurers (eight foreign) and 23 non-life insurance firms (six foreign). Insurance industry assets stood at NT$12.45 trillion (US$393.36 billion), or 27.68 percent of the financial sector’s total assets.

In 2010, total insurance premium income increased 14.73 percent over the previous year to NT$2.42 trillion (US$76.45 billion). The proportion of that amount received by life insurance operations was nearly 22 times greater than that received by non-life insurance operations. While the life insurance seg-ment has enjoyed steady growth in recent years, the non-life segment in 2010 expe-rienced positive growth for the first time in five years. Life insurance companies paid out NT$1.19 trillion (US$37.65 billion) in claims, and non-life insurers NT$62.25 billion (US$1.97 billion).

SecuritiesAs of June 2011, 767 stocks issued by

763 companies were listed on the Taiwan Stock Exchange (TWSE) 臺灣證券交易

所, with total market capitalization of NT$23.01 trillion (US$779.81 billion). The value of shares traded on the bourse in 2010 dropped 4.93 percent from 2009 to NT$28.22 trillion (US$891.81 billion), while trading volume fell 24.91 percent to 817.57 billion shares.

The TAIEX, the benchmark index of the TWSE, nevertheless rose by 9.58 percent to a high of 8,972.50 points at the end of 2010 from the 2009 high of 8,188.11 points, which likewise occurred at the end of that year. It continued to rise in the early months of 2011 before drop-ping to 8,652.59 points at the end of June.

The over-the-counter GreTai Securi-ties Market 證券櫃檯買賣中心 index, mean-while, slipped 4.07 percent from 150.05 points in early 2010 to 143.95 points at year-end and then moved down further to 134.04 points at the end of June 2011.

Foreign investors and mainland Chi-nese QDIIs (qualified domestic institu-tional investors) bought NT$5.37 trillion (US$169.69 billion) and sold NT$5.09 trillion (US$160.81 billion) worth of shares on the TWSE in 2010. From


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January to June 2011, their cumulative purchases and sales, respectively, reached NT$3.01 trillion (US$101.95 billion) and NT$2.99 trillion (US$101.17 billion). Their investments accounted for 31.19 percent of the market value at the end of 2010, increasing slightly to 31.39 percent at the end of June 2011. As of that time, 30 TWSE-listed companies had issued Taiwan Depositary Receipts 臺灣存託憑證.

It is projected that by 2013, an ad-ditional 330 foreign companies will be-come listed on Taiwan’s stock markets and thereby raise some NT$268 billion (US$9.08 billion) in funding.

Foreign Trade and InvestmentAfter declining by 23.8 percent in

2009, Taiwan’s foreign trade surged more than 50 percent in the first half of 2010 compared with the same period in the pre-vious year but tapered off to a 27-percent increase year-on-year in the following six months. Overall, trade value expanded 39 percent year-on-year to US$526 bil-lion, with exports rising by 34.8 percent to US$274.60 billion and imports grow-ing by 44.1 percent to US$251.24 billion in 2010.

This record growth in trade moved Taiwan up a notch over 2009 to become the world’s No. 16 exporter of merchan-dise, while remaining the No. 17 importer of merchandise in 2010. With a trade sur-plus of US$23.36 billion in 2010, down 20.3 percent from 2009, Taiwan ended the year with foreign exchange reserves of US$382.01 billion, the fourth-highest in the world.

Mainland China remained Taiwan’s largest export market in 2010, followed by the ASEAN-6 (six trading partners belonging to the Association of Southeast Asian Nations—Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam), the United States and Europe.

Its top import sources were Japan, main-land China and the ASEAN-6. Data on Taiwan’s principal trade partners and the export value of its merchandise by cat-egory in 2010 are listed in the pie chart and table so labeled.

Merchandise export orders in 2010 advanced an average 26.1 percent over the preceding year to an all-time high value of US$406.72 billion. About 27 percent of the orders came from mainland China, due in part to the lowering of tariffs under the Cross-Straits Economic Cooperation Framework Agreement (ECFA) 海峽兩岸經

濟合作架構協議, which came into effect in September 2010.

For the first time, in 2010, more than 50 percent of the export orders received were filled by Taiwanese-operated factories abroad—mostly in mainland China—which assemble a large share of the world’s sophisticated consumer electronics, such as notebook comput-ers, smartphones and tablet computers. Manufacturers in Taiwan nevertheless benefited from this arrangement, as they supplied overseas factories with integrated-circuit chips, flat-panel dis-plays and other high-tech components necessary to make such products.

As for the movement of direct invest-ment capital into and out of Taiwan, in 2010, US$3.91 billion in incoming invest-ments and US$15.05 billion in outbound investments were officially registered. These figures represented a decrease of 19.22 percent and an increase of 66.08 percent, respectively, over the previous year. About 32.39 percent of inbound in-vestment went to banking and insurance, and 10.14 percent to manufacturing. Of registered outbound investment capital, US$12.23 billion, or 81.26 percent, was headed for mainland China. Investment in electronic component manufacturing ac-counted for 21 percent of this total.


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Policy InitiativesInvestment Promotion

In 2010, private investment played an important role in the economy’s recovery, with a year-on-year rise of 33 percent. To make Taiwan a more attractive investment destination for both foreign and domestic interests, the Executive Yuan and the Leg-islative Yuan have given priority to such broad measures as removing barriers to investment, improving the tax environment and modernizing public infrastructure.

The Company Act 公司法 was revised in July 2010 to simplify procedures for

starting businesses and to strengthen cor-porate governance. A one-stop service for online application for business registra-tion was launched in May 2011. Other regulatory revisions in 2010 include lowering of the corporate income tax rate from 25 to 17 percent and adjustment of the scope of tax credits for research and development expenditures.

Hoping to build on Taiwan’s strengths and on improving cross-strait relations, the Executive Yuan Council (Cabinet) established a global investment task force in August 2010 to coordinate ef-forts to solicit investment in Taiwan by


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foreign multinational corporations as well as by overseas-based Taiwanese firms. A single-window service center was set up to match investors with business op-portunities, address overseas businesses’ operational and investment concerns, and provide customized service.

Under the overall coordination of the Executive Yuan’s Council for Economic Planning and Development (CEPD) 行

政院經濟建設委員會, ROC government agencies have formulated a wide variety of “flagship plans” (see section below under that heading) in consultation with the private sector for investment promo-tion. The global investment task force and other government-organized groups have given numerous presentations overseas and at home, with first-round promotion focusing on the areas of bio-technology, medical tourism, cultural and creative industries, smart handheld devic-es, cloud computing, renewable energy,

green construction, electric vehicles, urban renewal, creation of a “Taoyuan aerotropolis,” high-tech clustering in central Taiwan and international promo-tion of Taiwanese cuisine. The CEPD anticipates attracting investments worth NT$434 billion (US$14.71 billion) through such promotions.

Trade EnhancementThe MOEA has launched a series

of trade promotion programs in recent years. Implemented in 2008, the New Zheng He Plan 新鄭和計畫 provides ex-port financing to Taiwanese businesses while helping them develop markets in the mainland Chinese and emerging economies, bid on foreign government procurement programs and extend their services globally. In 2010, NT$7 bil-lion (US$221 million) was invested in this plan, creating business opportuni-ties worth US$22.9 billion.

Export Value of Merchandise by Category in 2010

Export Annual PercentageMerchandise Category Value Change of Total

(US$ billion) (%) Export Value*

All categories (total export value) 274.60 34.82 100.00Electronics 77.31 36.43 28.15Precision instruments (including digital cameras) 23.62 46.85 8.60Plastics/rubber and articles thereof 22.25 34.69 8.10Chemicals 19.23 38.02 7.00Machinery 16.73 52.23 6.09Iron and steel products 16.38 32.91 5.96Other metallic products 9.51 35.09 3.46Mineral products (mostly refined petroleum) 14.85 26.92 5.41Information and communications products 14.10 53.34 5.13Textile products (mostly yarns and fabrics) 11.30 20.95 4.12Electrical machinery products 11.28 21.10 4.11Vehicles, boats and transportation-related products 9.33 20.78 3.40Other goods 28.71 25.72 10.46

*Percentages of total export value do not add up to 100 due to rounding off. Source: Department of Statistics, Ministry of Finance


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A three-year program to promote high-quality, affordable products in emerging markets was initiated in 2010, focusing on the rapidly growing middle-class popula-tions in four emerging markets—mainland China, India, Indonesia and Vietnam. Under this program, comprehensive support has been provided to Taiwanese firms to enhance their capabilities in technology development, production, design, branding and marketing, thereby helping them create trade opportunities. During its first year of implementation, the program has promoted the image of Taiwanese products in the four markets, generating US$16.2 billion worth of business opportunities.

To facilitate overseas sales of superior Taiwan-made products, in October 2010, the Cabinet approved a plan to develop the logistics service industry calling for an investment of NT$101.1 billion (US$3.2 billion). Scheduled for comple-tion in 2013, the plan aims to upgrade airport and harbor infrastructure, boost customs clearance efficiency and pro-mote cross-border cooperation. In addi-tion to benefiting exporters, it is expected to spur integration of regional supply chain resources.

Industrial InnovationIncreasingly sharp economic competi-

tion as well as new opportunities stemming from globalization and the rise of newly industrialized economies have underlined the imperative for Taiwan’s businesses to place greater importance on innovation. Among the several measures taken to en-courage such efforts is the enactment of the Industrial Innovation Act 產業創新條例 in 2010. The act offers a tax credit on 15 percent of innovative research expendi-tures as well as various subsidies over the period 2010 to 2019. In addition, it liberal-izes criteria for receiving R&D tax credits.

For conventional industries such as shoe and textile manufacturing that have been impacted by mounting competition from emerging economies with low labor and land costs, the MOEA initiated as-sistance programs in 2010 to facilitate business-academia collaboration, indus-trial clustering and consultation with public research organizations such as the Industrial Technology Research Institute

工業技術研究院 (see Chapter 9, “Science and Technology”) in order to help busi-nesses switch to manufacture of higher-value products.

To protect intellectual property rights and enable patented innovative products to come to the market quickly, the Cabi-net has established a program to invest NT$11.8 billion (US$372.92 million) from 2010 to 2015 to fund a patenting consultation center to promote the com-mercialization of innovative products.

EmploymentThanks in part to strong recovery from

the global economic recession that began in late 2008, Taiwan’s unemployment rate dropped to 4.67 percent in Decem-ber 2010 after peaking at 6.13 percent in August 2009. The number of employed increased by 2.21 percent year-on-year to 10.61 million at the end of 2010. Salaries also fared well in 2010, with the average monthly wage for the combined industrial and service sectors growing 3.75 percent year-on-year to NT$44,396 (US$1,403) as of December 2010.

Government employment policies, including provision of short-term pub-lic employment, subsidization of wages for new hires, and training programs, have also played a role in improving the employment picture. In recognition that only a vibrant economy can ensure long-term employment stability, the admin-istration of President Ma Ying-jeou has


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put emphasis on expediting industrial renovation and catalyzing the develop-ment of new types of businesses and busi-ness opportunities in all sectors.

Flagship ProgramsThe Ma administration has pushed

forward a number of “flagship programs” aimed at promoting sustainable economic development and enhancing the qual-ity of life in Taiwan. Among them are the i-Taiwan 12 Projects 愛臺十二建設, which focus primarily on public infra-structure. Scheduled for completion by 2016 at a projected cost of NT$4 trillion (US$126.42 billion), about one-third of which is expected to come from private investors, the projects include:

Modernizing • transportation infrastructure;Renovating the • Kaohsiung harbor re-gion 高雄港區, including upgrading of its port facilities; Developing • Taiwan Taoyuan Interna-tional Airport 臺灣桃園國際機場 and its environs into an “aerotropolis”;Enhancing high-tech industrial clustering;• Developing wireless broadband and •

digital content industries;Forming a series of innovative technol-• ogy corridors utilizing science parks;Regenerating urban areas and indus-• trial parks;Rejuvenating rural communities;• Developing fishing villages and ma-• rine recreation;Creating lowland forest reserves;• Managing water resources and carry-• ing out flood prevention engineering projects; andConstructing sewer systems.•

Also underway are programs worth NT$216.02 billion (US$6.83 billion) aimed at stimulating the development of six emerging industries between 2009 and 2013: • Biotechnology, with focuses on R&D,

drug testing and setting up a venture capital fund and a biotech business in-cubation center;

• Tourism, aimed at enhancing the qual-ity of travel in Taiwan and stimulating regional development in all parts of the island;

• Green energy, including development

With public- and private-sector support, artists and designers are blending creativity with cultural tradition to produce distinctive works such as this decorative porcelain piece.


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of photovoltaics, LED lighting, wind energy, hydrogen and fuel cells, energy-saving ICT and electric vehicles;

• Medical care, with attention to long-term care, improved quality of care in rural communities and medical tourism;High-end • agriculture, focusing on organic farming, agritourism, export expansion and regeneration of rural communities; and

• Cultural and creative industries, includ-ing television, filmmaking, pop music, crafts, design and entertainment-related digital content.

Programs have also been launched to expedite the development of four “intel-ligent” industries aimed at maintaining information technology competitiveness, cutting carbon dioxide emissions and conserving energy. About NT$17.95 bil-lion (US$567.28 million) in public fund-ing is expected to be spent between 2010 and 2016 in the following areas:• Cloud computing, aimed at raising

government efficiency, enhancing the added value of IT hardware and stimu-lating the development of industries across the board;

• Electric vehicles, with attention to both vehicle manufacturing and development of infrastructure conducive to the use of such vehicles;

• Green architecture, integrating ICT with eco-friendly construction and other technologies; andPatent commercialization, providing • consultation and other services to help bring innovative ideas to market.

Given that the service sector is the biggest contributor to GDP and em-ploys the most people, a number of the aforementioned areas as well as others are receiving special attention. These include development of medical tourism, music and digital content, international logistics, fundraising for high-tech and

innovation-oriented industries, urban re-newal, international promotion of Taiwan-ese cuisine, MICE (meetings, incentives, conferences and exhibitions), development of WiMAX technology, Chinese-language e-commerce and expanded recruitment of students from overseas.

Development programs in these fields are expected to generate private investment of NT$400 billion (US$12.64 billion) and create an output value of over NT$1 trillion (US$31.60 billion) by 2013. Insofar as possible, programs are being designed with a view to helping bridge the urban-rural gap in living stan-dards, balance income distribution and improve the quality of life society-wide.

Cross-Straits Economic Cooperation Framework Agreement

The ECFA took effect on September 12, 2010 (see Chapter 6, “Cross-strait Relations”), constituting a milestone in the normalization of economic relations between Taiwan and mainland China.

Under the ECFA, tariffs on 539 Taiwan-made products and 267 mainland goods in the “early harvest program” are to be reduced and eventually eliminated in three stages by the end of 2012. The pact also calls for follow-up negotiations on trade in goods, trade in services, in-vestment and dispute settlement.

Since the signing of the ECFA, for-eign investors have shown greater interest in investing and raising capital in Taiwan. It has also put Taiwanese businesses on a more level playing field with other countries’ competitors in the mainland Chinese market. Further, it is expected to improve conditions for Taiwan’s negotia-tion of trade agreements with other na-tions while helping domestic companies diversify investments and expand their global presence.


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l Ministry of Economic Affairs: http://www.moea.gov.twl Council for Economic Planning and Development, Executive Yuan: http://www.cepd.gov.twl Directorate-General of Budget, Accounting and Statistics, Executive Yuan: http:// www.dgbas.gov.twl Bureau of Foreign Trade: http://www.trade.gov.twl Industrial Development Bureau: http://www.moeaidb.gov.twl Investment Commission: http://www.moeaic.gov.twl Small and Medium Enterprise Administration: http://www.moeasmea.gov.twl Intellectual Property Office: http://www.tipo.gov.twl Central Bank of the Republic of China: http://www.cbc.gov.twl Financial Supervisory Commission, Executive Yuan: http://www.fscey.gov.twl Ministry of Finance: http://www.mof.gov.twl Taiwan Stock Exchange Corp.: http://www.twse.com.twl GreTai Securities Market: http://www.otc.org.twl Taiwan Futures Exchange: http://www.taifex.com.tw

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